Exit Methods

In this section

Beyond the standard Take Profit and Stop Loss mechanisms, our Trading Panel incorporates a variety of advanced exit methods. These methods are not commonly available in typical trading applications and may not be supported by all brokers or exchanges. However, they are natively integrated into our platform, providing traders with sophisticated tools to exit positions in ways that align with complex strategies, without the need for additional programming.

Advanced Exit Strategies

Our platform offers several innovative exit methods that go beyond traditional approaches:

ATR Trailing Stop: Advanced Exit Method

The ATR Trailing Stop is a dynamic exit strategy utilized within our Trading Panel to protect profits by adjusting the stop loss level in response to market volatility. This method is ideal for managing positions in fast-moving markets, ensuring that traders can capitalize on market moves while safeguarding gains from potential reversals.

How It Works

Calculation Basis: The ATR (Average True Range) serves as the foundation for this trailing stop method. ATR measures market volatility by decomposing the entire range of an asset for a given period.
Adjustment Formula:
1. Calculate ATR: Determine the Average True Range for a predefined period.
2. Set Multiplier: Typically, the ATR value is multiplied by a factor to determine the distance of the trailing stop from the current market price; in this case, 3 times the ATR.
3. Application in Trends:
  - Up-Trend: Subtract 3x ATR from the closing price to set the trailing stop for long positions.
  - Down-Trend: Add 3x ATR to the closing price for setting the stop for short positions.
4. Daily Adjustment: Continue to adjust the trailing stop each day based on the new closing prices and ATR calculations. The stop adjusts only in the direction of the trade, known as the ratchet mechanism, which prevents the stop from moving downward in a long trade or upward in a short trade.
5. HighLow Option Variation: Instead of basing the stop on the closing price, the stop is adjusted from the daily high or low, which can provide a tighter or more lenient stop depending on the trend's volatility.

Key Features

Built-In Ratchet Mechanism: Ensures that the stop loss does not move in a direction that would unfavorably expose the trader to risk, locking in profits more effectively.
Flexibility in Settings: Traders can specify the ATR period and the multiplier according to their risk tolerance and trading style. This customization allows for precision in how closely the stops trail the price movement.

Implementation

To activate the ATR Trailing Stop within the Trading Panel:

Specify the ATR Period: Choose the number of days for which the ATR should be calculated to best reflect the asset's typical volatility.
Set the Multiplier: Decide on the multiplier for the ATR to determine the trailing stop's distance from the current price, balancing between too tight, causing premature exits, and too loose, diminishing potential profits.

The ATR Trailing Stop is a powerful tool for traders who wish to maintain positions in profitable trends while effectively managing the risk of significant losses due to market reversals. By automatically adjusting to reflect current market conditions, it allows traders to remain in the market during favorable trends and exit when the trend shows signs of reversal.

Average Candle Size

The Average Candle Size exit method allows traders to set an exit trigger based on the volatility indicated by the size of recent candlesticks. This method assesses the average size of candlesticks over a specified number of bars to determine significant changes in market volatility, which could indicate an optimal exit point.

Implementation

Number of Bars: Traders specify the number of the most recent bars to include in the calculation. This determines the period over which volatility is assessed.
Average Calculation: The system calculates the average size of these bars, considering both the body and the wicks, to gauge overall volatility.
Multiplier Setting: A multiplier is applied to this average size to set a threshold for triggering an exit. If the average size of new candles exceeds this adjusted average, the position is closed.

Usage

This method is particularly useful in markets where price action is expected to remain within a certain volatility range. Exiting when candle size exceeds this range can help traders avoid potential losses in increasingly volatile markets.

Breakeven Exit Method

The Breakeven exit method is a risk management tool that allows traders to automatically close a position once it reaches a point where no net profit or loss is incurred. This function is crucial for traders who aim to protect their initial capital once a position has moved favorably enough to cover trading costs.

Implementation

Point Threshold: Traders set a specific number of points that the price must move into profit from the entry price. Once this threshold is reached, the breakeven point is effectively set.
Activation: The breakeven function activates once the price retraces back to this newly established breakeven point, closing the position to ensure that no losses are taken on the trade.

Usage

This method is advantageous for conservatively managing trades by securing a no-loss exit once initial risk has been covered. It is especially useful in volatile markets or in situations where a trader wishes to safeguard against any loss after a favorable move.

Chandelier Stop

The Chandelier Stop is an advanced exit strategy used within our Trading Panel to protect profits by setting dynamic stop-loss levels. This method uses the volatility of the market, measured by the Average True Range (ATR), to determine where to place stop losses for both long and short positions.

How It Works

For Long Positions: The Chandelier Stop is set by subtracting a multiple of the ATR from the highest high reached during the specified period. This creates a trailing stop loss that adjusts downward only, as the price reaches new highs, effectively locking in profits as the market moves favorably.
For Short Positions: Conversely, the stop is set by adding a multiple of the ATR to the lowest low of the period for short trades. This stop adjusts upward only, securing a safety net as the price drops.

Calculation Details

Chandelier Stops utilize the Average True Range (ATR) to dynamically set exit points from a trade by subtracting a chosen multiple of the ATR from the peak high of a specified period. For example, using typical settings:

Up-Trend Example: The highest price over the last 22 days minus three times the ATR of those 22 days.

Conversely, during a down-trend, the approach inverts:

Down-Trend Example: The lowest price over the last 22 days plus three times the ATR for that period.

The selected timeframe for calculating the ATR is critical—it must be sufficient to encapsulate the peak of the current trend. If too brief, the resulting stops may decrease prematurely; if overly extended, they might reflect a prior trend's volatility rather than the current one. Additionally, while the same duration can be used for analyzing both up-trends and down-trends, down-trends often accelerate faster than up-trends and might benefit from a shorter analysis period.

The multiplier applied to the ATR typically ranges from 2.5 to 3.5, although a factor of 3 is commonly used. Adjusting this multiplier allows traders to tailor the sensitivity of the Chandelier Stops to their risk tolerance and trading style.

Strategy Application

Time Period Flexibility: The time frame for the ATR calculation can be adjusted to fit the specific trading strategy and market conditions. Shorter periods may be used in faster-moving down-trends, while longer periods might be preferable in more stable up-trends.
Stop Adjustment: The Chandelier Stops are designed to only move in one direction for each trade setup (up for shorts, down for longs), which prevents the stop from moving against the trade direction, thus providing a "ratchet" effect that locks in profits.

Benefits

Using the Chandelier Stop method allows traders to stay in the market as long as the price is moving favorably, while automatically securing gains and limiting losses when a reversal occurs. This method is particularly effective in trending markets where traders wish to ride the trend for as long as possible without getting stopped out prematurely.

Close After X Bars

Overview: This exit method is designed for simplicity and effectiveness. It automatically closes the position after a predetermined number of bars have elapsed since the method was activated.

Usage: Ideal for traders who rely on specific timeframes or bar counts for their strategies, this method ensures that positions are not held beyond the set number of bars, providing a straightforward approach to timing exits based on trading cycles.

Close at Date Time

Overview: This method enables a trade to be closed automatically at a specific calendar date and time.

Usage: It is particularly useful for traders who need to align exits with specific events or conditions expected at a particular moment, such as before market close, economic announcements, or the expiration of options.

Close at the End of Specified Day

Overview: This exit strategy is set to close the position at the close of trading on a specified day.

Usage: Useful for traders who aim to avoid holding positions overnight or through weekends, minimizing exposure to uncontrolled market gaps or other off-hours risks.

Exit at Time

Overview: Similar to closing at a specific date, this method allows traders to specify an exact time for exiting a position, independent of date.

Usage: This method suits traders looking to capitalize on intra-day price movements and manage risk by exiting at times when volatility or trading volumes change, such as before market close.

Stop Loss

Overview: A conventional exit method where a trade is closed once the market reaches a predetermined loss threshold.

Usage: Essential for managing risk and limiting potential losses, the stop loss is a fundamental tool for all trading strategies to help preserve capital.

Take Profit

Overview: This method exits a position once the market reaches a predetermined profit target.

Usage: It locks in profits at an optimal point as defined by the trader’s objectives, ensuring that gains are realized before market reversals can diminish them.

Trailing Stop

The Trailing Stop is a versatile exit mechanism that automatically adjusts the stop loss level as the market moves in favor of a position. This method is designed to protect gains by allowing a trade to remain open and continue to profit as long as the price is moving favorably, while simultaneously safeguarding against significant losses by maintaining a stop loss that moves with the price.

Functionality

Start Trailing After: This parameter sets the initial threshold for the trailing stop to activate. The trailing stop will begin once the price moves a specified number of points in favor of the position. This ensures that the trailing stop is not activated prematurely, allowing some room for the price to establish a clear direction.
Stop Size in Points: This determines the distance of the trailing stop from the current market price. Setting the stop size involves specifying how many points away from the current price the stop loss should be maintained. This distance is crucial as it needs to balance between allowing enough room for the trade to breathe and not being too far that it diminishes the protective function of the stop loss.
Step in Points: The step size dictates how often the trailing stop is adjusted. This parameter sets the interval in points that the market must move in favor of the trade before the trailing stop is moved. A smaller step size means the stop loss is adjusted more frequently, tightening the lock on gains as the market advances favorably.

Benefits

Protection of Gains: Trailing stops are particularly effective in securing profits on trades by allowing positions to remain open during favorable trends and closing them when the trend begins to reverse.
Risk Management: By dynamically adjusting the stop loss according to market movements, trailing stops help manage risk without the need for constant manual adjustment, providing traders with peace of mind.
Flexibility: Traders can tailor the trailing stop parameters according to their risk tolerance and trading strategy, making it a flexible tool suited for various trading styles and market conditions.

Application

Trailing stops are ideal for markets with clear trends where price movements are relatively predictable. They are especially valuable in volatile markets where sudden reversals can quickly erode gains. By setting appropriate parameters for the trailing stop, traders can ensure that they maximize their profit potential while minimizing losses.

Volatility Stop

The Volatility Stop is an advanced exit strategy that utilizes market volatility, specifically the Average True Range (ATR), to set protective stops for both long and short positions. This method, developed by Welles Wilder, is particularly effective in managing trades by adapting to market conditions and ensuring positions are not prematurely closed on normal price fluctuations.

How It Works

Initial Trend Direction Determination: The first step involves identifying whether the market is in an uptrend or downtrend. This direction will influence how the Volatility Stop is set.
Significant Close (SIC) Calculation:
- For an uptrend: Identify the highest close reached during the trend.
- For a downtrend: Determine the lowest close.
Average True Range (ATR) Calculation: Compute the ATR for a specified period to gauge the market's volatility. In this example, a 7-day period is used.
Stop Calculation and Adjustment:
- Multiply the ATR by a predetermined multiple (e.g., 3.0).
- For an uptrend: Subtract this value from the SIC to set the stop.
- For a downtrend: Add this value to the SIC to establish the stop.
- Update the stop daily based on the new closing prices and ATR calculations. If the market price crosses below the stop for a long position (or above for a short), the stop is recalculated from the new SIC.
Stop-and-Reverse Feature: Similar to Wilder’s Parabolic SAR, if the stop is breached, it suggests a potential trend reversal. The SIC is then reset to the latest close, and the trend direction is reversed for the purpose of the stop calculation.

Parameters Required

ATR Period: The number of days over which the ATR is calculated, affecting how responsive the stop is to recent market volatility.
Multiplier: The factor by which the ATR is multiplied to set the distance of the stop from the SIC, balancing between too close (triggering frequent exits) and too far (excessive risk exposure).

Benefits

Dynamic Risk Management: Adapts to changes in market volatility, offering more flexible and responsive risk management compared to static stop loss methods.
Protects Profits and Limits Losses: Helps lock in profits by moving the stop in line with favorable price movements and limits losses by exiting the trade when the trend reverses.
Applicability to Various Market Conditions: Effective in both trending and volatile markets as it adjusts to the level of price movement inherent in the current market environment.

Application

Volatility Stops are particularly useful in markets known for their volatility, where price swings can be significant. They allow traders to stay in the trade during minor pullbacks by setting stops that reflect the current volatility, potentially increasing profitability by avoiding early exits during normal market corrections.